Production checks rice price

Andrew Bell | Jul 22, 2005

Rice producers brood annually about what lies ahead in the marketplace, but this year they are particularly stressful because of potential changes in farm programs.

Mike Salassi, professor of agricultural economics at Louisiana State University, addressed both interlocking subjects at the annual rice field day held on June 30 at the Rice Research Station in Crowley, La.

He said LSU ag economists are examining every budget scenario possible to prepare the industry to negotiate with congressmen for the best farm bill possible.

“One problem is that we are not going to know what that decision (concerning farm bill cuts) is until well into September. So, what we are doing now is covering all our bases,” he said. “We are looking at what would happen if there were changes to target prices, growing rates and payment limits. Each area is a potential one to be reduced.”

Salassi said possible cuts in federal agriculture subsidies determined this year could be applied over a five-year period, starting with the 2006 budget. One projected mandatory agricultural spending cut would be about $173 million annually.

Salassi said all agricultural budget areas are subject to have funding reductions, not just a few as some might assume.

“Congress is going to have to look at the various programs of mandatory spending in agriculture. It is not just price supports, it’s food stamps and nutrition, conservation and export trade programs,” he said.

The “challenge” for rice leaders, he said, is to negotiate some budget reduction with Congress that is fair to agriculture.

“We have to analyze all options. The ag centers (representatives) will work with producers and analyze proposals to try to be in the best negotiating position it can with legislators,” he said.

Market projections

The USDA projects that on Aug. 1, Louisiana will enter the marketing year with 39.4 million hundredweight of rice as beginning stocks, including stocks carried over from the current market year.

Salassi said that figure is 66 percent higher than last year and the largest amount since 1993.

The projected amount of 2005 domestic rice is slightly less than the record-setting 230.8 million hundredweight established last year.

“We’re bringing a lot of rice into the market this year,” he said. “We are also going to have fairly large production. When you add the little amount of imports we have, the total projection for next year is 4 percent higher than last year — also a record.”

Salassi said domestic use of rice — composed primarily of food and industrial use with a small amount for seed use — is projected at 126.2 million hundredweight. That is a record amount for domestic use of rice, and about 2 percent higher than last year.

While copious supplies tend to hold prices down, Salassi noted, both domestic use and exports are projected to be up for next year.

“That increase in exports — approximately 14 percent over last year — is due primarily to the fact that our export price was much more competitive with Thailand than it had been in years past,” he said.

“When you add domestic use and exports, the total use of rice is projected to be a record next marketing year at 247.2 million hundredweight, 8 percent higher than last year.”

Finally, Salassi touched on price projections. He said USDA projects the upcoming seasonal average market price for rice to range between $7.20 per hundredweight and $7.50 per hundredweight. That estimate is nearly the same price held in 2004.

“As we get into harvest and make decisions on whether or not to hold and store rice, it is important to look at each month when the USDA projects seasonal average price, because it’s going to change over the next few months,” he advised. “You want to pay attention to that.”